On Monday, France summoned the US ambassador over reports in Le Monde newspaper that the US National Security Agency (NSA) had spied on millions of French phone calls. A day later, Le Monde reported that the NSA had spied on French diplomats in Washington and at the UN.

French President Francois Hollande had already called for the issue to be put on the agenda of the summit, where EU leaders are due to discuss Europe's digital economy, economic recovery and immigration.

Other leaders are also likely to want further clarification from Washington over the activities of its NSA in Europe, says BBC Europe Editor Gavin Hewitt.

'Completely unacceptable'

"It's really not on for friends to spy on each other," said Chancellor Merkel as she arrived at the EU summit in Brussels.

The German government has not said how it received the tip about the alleged US spying. But news magazine Der Spiegel, which has published stories based on material from former CIA contractor Edward Snowden, said the information had come from its investigations.

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Germany's Berliner Zeitung regrets that "only now does the government appear to really understand what it is happening"

France's Le Figaro says the German government's reaction is "a warning shot directed at the United States"

The New York Times fears that there is mounting damage to "core American relationships"

State-monitoring of phone calls has a particular resonance in Germany - Mrs Merkel herself grew up in East Germany, where phone-tapping was pervasive.

Earlier, her spokesman said the German leader "views such practices... as completely unacceptable" and had demanded a "complete and comprehensive explanation".

"Among close friends and partners, as the Federal Republic of Germany and the US have been for decades, there should be no such monitoring of the communications of a head of government," said Steffen Seibert in a statement.

Gunther Krichbaum, the chairman of the European affairs committee in Germany's Bundestag, told the BBC that "if it turns out to be true this... is a real scandal".

Mr Krichbaum said he was convinced that he and his colleagues would "not go ahead" with negotiations over a major trade treaty with the US before finding out what had happened.

White House spokesman Jay Carney said the US "is not monitoring and will not monitor the communications of the chancellor".

He said the US was reviewing the way it gathered intelligence, to ensure that "we properly balance the security concerns of our citizens and allies with the privacy concerns that all people share".

German ministers' phones have reportedly been protected using technology from security firm Secusmart since 2009. Secusmart said in March that German government officials would be issued with new, highly-secured technology made for Blackberry mobile phones.

Media captionWhite House spokesman Jay Carney said President Obama had "assured" Chancellor Merkel the US was not monitoring her phone

A German IT expert told the BBC that security services for many countries could have intercepted the chancellor's calls before she had full encryption.

A number of US allies have expressed anger over the Snowden-based spying allegations.

Veteran French European Commissioner Michel Barnier told the BBC on Thursday that "enough is enough", and that confidence in the US had been shaken.

Mr Barnier, the commissioner for internal market and services, said Europe must not be naive but develop its own strategic digital tools, such as a "European data cloud", independent of American oversight.

'No business as usual'

Germany's press echoed a sense of outrage, with a front-page commentary Sueddeutscher Zeitung - one of the country's most respected papers - referring to the "biggest possible affront".

German Defence Minister Thomas de Maiziere said it would not be possible to go back to business as usual. This is more than a tiff which will blow over easily, the BBC's Stephen Evans reports from Berlin.

In July, German media carried comments by Mr Snowden suggesting the US NSA worked closely with Germany and other Western states on a "no questions asked" basis, monitoring German internet traffic, emails and phone calls.

"They [the NSA] are in bed with the Germans, just like with most other Western states," Mr Snowden was quoted as saying by Der Spiegel - though Mrs Merkel denied any knowledge of the collaboration.

President Obama had assured Chancellor Merkel in June that German citizens were not being routinely spied upon. At the time, she was criticised by her political opponents for not being more sceptical.

A Der Spiegel report in September that the US NSA had cracked the security codes the protect data on iPhones, Blackberries and Android devices led to demonstrations in Berlin.